Committee of Public Accounts


Press Notice No. 22 of Session 2002-03, dated 13 June 2003


TWENTY-SECOND REPORT: PFI REFINANCING UPDATE (HC 203)

Mr Edward Leigh MP, Chairman of the Committee of Public Accounts, said today the OGC had done well in negotiating a voluntary code under which industry would share PFI refinancing gains with the public sector, and urged Departments to reap these benefits.

Mr Leigh was speaking as the Committee published its 22nd Report of this Session, which examined the outcomes departments were likely to achieve from new arrangements for refinancing PFI deals put in place by the Office of Government Commerce (OGC).

The Committee found that it is a good negotiating achievement for the OGC to have established with the private sector that refinancing gains on past PFI deals should be shared 70:30. In respect of past deals which had not provided for refinancing gains to be shared, individual departments would have faced an uphill task in arguing to share them. Acting for government as a whole, the OGC was successful in its determined approach to the private sector. There may be other aspects of the PFI where a central approach might be worthwhile: for example in respect of the banks' standard terms for external finance of PFI deals, or for associated financial instruments.

Whilst the new guidance on sharing refinancing gains is welcome, the new arrangements can only work effectively if departments equip themselves to pursue refinancing gains. To date, departments have not been good at recognising refinancings and understanding their complexities. Departmental staff involved in managing PFI contracts will need specific training to enable them to recognise when refinancing situations may have arisen, so that they can seek expert advice on how to handle them.

Mr Leigh said today:

"The OGC has done well to negotiate a voluntary code of practice with industry under which the public sector will receive a 30% share in any gains from refinancing the deal, even if there was no provision in the original contract. The estimated return to the taxpayer will be between £175 million and £200 million. The work of this Committee and the National Audit Office has been key in creating a climate in which this was possible. Departments must now ensure they are in a position to reap these benefits by training their staff to recognise when refinancing has taken place."


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